SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
or
Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended March 31, 1994 Commission File Number 1-3034
Northern States Power Company
(Exact name of registrant as specified in its charter)
Minnesota 41-0448030
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
414 Nicollet Mall, Minneapolis, Minnesota 55401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 330-5500
None
Former name, former address and former fiscal year, if changed since
last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
_____ _____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 30, 1994
Common Stock, $2.50 par value 66,895,840 shares
<TABLE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Northern States Power Company (Minnesota) and Subsidiaries
Statements of Income (Unaudited)
<CAPTION>
Three Months Ended
March 31
1994 1993
(Thousands of dollars)
<S> <C> <C>
Utility operating revenues
Electric................................................... $494,031 $469,945
Gas........................................................ 189,431 170,808
Total.................................................... 683,462 640,753
Utility operating expenses
Fuel for electric generation............................... 76,004 80,933
Purchased and interchange power............................ 56,467 30,228
Cost of gas purchased and transported...................... 121,805 114,927
Other operation............................................ 76,783 82,403
Maintenance................................................ 39,849 42,691
Administrative and general................................. 49,167 45,826
Conservation and energy management......................... 8,157 6,884
Depreciation and amortization.............................. 67,345 65,150
Taxes: Property and general................................ 59,929 56,476
Current income tax expense.......................... 43,596 29,877
Deferred income tax expense......................... 1,940 6,539
Investment tax credit adjustments - net............. (3,375) (2,227)
Total.................................................... 597,667 559,707
Utility operating income.................................... 85,795 81,046
Other income and expense
Other income and deductions - net.......................... 3,159 (530)
Allowance for funds used during construction - equity...... 1,208 659
Total Other income........................................ 4,367 129
Income before interest charges.............................. 90,162 81,175
Interest charges
Interest on long-term debt................................. 22,827 26,230
Other interest and amortization............................ 3,078 1,977
Allowance for funds used during construction - debt........ (1,537) (1,513)
Total.................................................... 24,368 26,694
Net Income ................................................. 65,794 54,481
Preferred stock dividends .................................. 3,057 3,802
Earnings available for common stock......................... $62,737 $50,679
Average number of common and equivalent
shares outstanding (000's)................................ 66,742 62,863
Earnings per average common share........................... $ .94 $ .81
Common dividends declared per share......................... $ .645 $ .630
Statements of Retained Earnings (Unaudited)
Balance at beginning of period.............................. $1,127,372 $1,099,896
Net income for period....................................... 65,794 54,481
Dividends declared:
Cumulative preferred stock................................. (3,057) (3,802)
Common stock............................................... (43,050) (39,627)
Balance at end of period.................................... $1,147,059 $1,110,948
The Notes to Financial Statements are an integral part of the Statements of Income and Retained Earnings.
</TABLE>
<TABLE>
Northern States Power Company (Minnesota) and Subsidiaries
Balance Sheets (Unaudited)
<CAPTION>
March 31, December 31,
1994 1993
(Thousands of dollars)
<S> <C> <C>
ASSETS
UTILITY PLANT
Electric.................................................. $6,197,766 $6,167,670
Gas....................................................... 624,197 621,871
Other..................................................... 242,571 237,293
Total................................................. 7,064,534 7,026,834
Accumulated provision for depreciation.................. (2,949,818) (2,888,144)
Nuclear fuel.............................................. 764,558 749,078
Accumulated provision for amortization.................. (686,458) (673,669)
Net utility plant..................................... 4,192,816 4,214,099
CURRENT ASSETS
Cash and cash equivalents................................. 55,357 57,812
Short-term investments.................................... 150 26
Accounts receivable - net................................. 281,546 266,531
Accrued utility revenues.................................. 86,897 111,296
Federal income tax and interest receivable........... 35,970 20,927
Materials and supplies - at average cost.................. 151,475 145,375
Prepayments and other..................................... 39,898 40,885
Total current assets.................................... 651,293 642,852
OTHER ASSETS
Regulatory assets.................................... 352,474 334,354
External decommissioning fund and other investments.. 250,381 169,745
Non-regulated property - net......................... 154,690 156,707
Intangible assets and other.......................... 68,266 69,961
Total other assets................................ 825,811 730,767
TOTAL................................................. $5,669,920 $5,587,718
LIABILITIES
CAPITALIZATION
Common stock equity
Common stock and premium................................ $ 712,091 $ 710,969
Retained earnings....................................... 1,147,059 1,127,372
Leveraged common stock held by ESOP .................... (8,815) (10,887)
Total common stock equity............................. 1,850,335 1,827,454
Cumulative preferred stock and premium.................... 240,469 240,469
Long-term debt............................................ 1,307,642 1,291,867
Total capitalization.................................. 3,398,446 3,359,790
CURRENT LIABILITIES
Long-term debt due within one year........................ 35,678 90,618
Redeemable long-term debt............................ 141,600 141,600
Short-term debt - commercial paper................... 143,000 106,200
Accounts payable.......................................... 184,366 210,654
Taxes accrued............................................. 258,070 177,853
Interest accrued.......................................... 19,339 24,110
Dividends declared on common and preferred stocks......... 46,107 46,195
Rate refunds to customers............................ 12,427 12,235
Accrued payroll, vacation and other....................... 65,531 61,557
Total current liabilities............................. 906,118 871,022
OTHER LIABILITIES
Accumulated deferred income taxes......................... 787,165 788,378
Accumulated deferred investment tax credits............... 184,014 187,466
Regulatory liabilities.................................... 246,570 243,880
Pension and other benefit obligations................ 76,052 64,224
Other long-term obligations and deferred income........... 71,555 72,958
Total other liabilities............................... 1,365,356 1,356,906
TOTAL............................................... $5,669,920 $5,587,718
The Notes to Financial Statements are an integral part of the Balance Sheets.
</TABLE>
<TABLE>
Northern States Power Company (Minnesota) and Subsidiaries
STATEMENTS OF CASH FLOWS (Unaudited)
<CAPTION>
Three Months Ended
March 31
1994 1993
(Thousands of dollars)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income............................................................. $65,794 $54,481
Adjustments to reconcile net income to cash from operating activities:
Depreciation and amortization........................................ 73,541 69,289
Nuclear fuel amortization............................................ 12,789 8,444
Deferred income taxes................................................ 1,193 3,589
Deferred investment tax credits recognized........................... (3,452) (2,302)
Allowance for funds used during construction - equity................ (1,208) (659)
Cash provided by changes in certain working capital items............ 46,466 64,149
Conservation program expenditures - net of amortization.............. (2,767) (1,626)
Cash provided by changes in other assets and liabilities............. 353 7,734
Net cash provided by operating activities 192,709 203,099
Cash Flows from Investing Activities:
Capital expenditures .................................................. (60,681) (72,131)
Decrease in construction payables...................................... (8,098) (8,726)
Allowance for funds used during construction - equity.................. 1,208 659
Purchase of short-term investments - net............................... (124) (207)
Investment in external decommissioning fund............................ (7,667) (8,030)
Investments in non-regulated projects and other........................ (68,334) (2,027)
Net cash used for investing activities (143,696) (90,462)
Cash Flows from Financing Activities:
Change in short-term debt - net issuances (repayments)................. 36,800 (86,631)
Proceeds from issuance of long-term debt - net......................... 198,696 107,165
Repayment of long-term debt (including reacquisition premium).......... (241,115) (101,292)
Proceeds from issuance of common stock - net........................... 346 12,799
Dividends paid......................................................... (46,195) (43,220)
Net cash used for financing activities (51,468) (111,179)
Net (decrease) increase in cash and cash equivalents...................... (2,455) 1,458
Cash and cash equivalents at beginning of period.......................... 57,812 15,752
Cash and cash equivalents at end of period................................ $55,357 $17,210
The Notes to Financial Statements are an integral part of the Statements of Cash Flows.
</TABLE>
Northern States Power Company (Minnesota) and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the financial
position of Northern States Power Company (Minnesota) (the Company) and its
subsidiaries (collectively, NSP) as of March 31, 1994 and December 31, 1993
and the results of its operations for the three months ended March 31, 1994
and 1993 and its cash flows for the three months then ended. Due to the
seasonality of NSP's electric and gas sales, operating results on a quarterly
basis are not necessarily an appropriate base from which to project annual
results.
The accounting policies followed by NSP are set forth in Note 1 to NSP's
financial statements in the 1993 Form 10-K. The following notes should be
read in conjunction with such policies and other disclosures in the Form 10-K.
1. Accounting Changes
Postemployment Benefits
Effective January 1, 1994 NSP adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 112 - Accounting for Postemployment
Benefits. This standard required the accrual of certain postemployment costs
(such as injury compensation and severance) that are payable in future time
periods. The impact to NSP's results of operations and financial condition
of adopting SFAS No. 112 was immaterial.
Fair Value Accounting for Certain Investments
Effective January 1, 1994 NSP adopted the provisions of SFAS No. 115 -
Accounting for Certain Investments in Debt and Equity Securities. This new
standard resulted in an increase of approximately $4.7 million to
decommissioning investments to present such investments at their market value.
This increase represents an unrealized gain on investments which has been
deferred as a regulatory liability. The Company anticipates the offsetting
of such gains against decommissioning costs in future ratemaking.
Accounting for Employee Stock Ownership Plans (ESOP)
Effective January 1, 1994 NSP adopted the American Institute of
Certified Public Accountants' Statement of Position (SOP) 93-6. This SOP
required the accrual of compensation expense for any market value increase in
uncommitted leveraged ESOP shares. It also required the reduction of average
common shares used to compute earnings per share by such uncommitted ESOP
shares. No compensation expense was required to be recorded by NSP upon
adoption of the SOP. The impact of the reduction in average common shares had
an immaterial impact on 1994 earnings per share (less than 1 cent). Of the
5.4 million shares of the Company's stock that NSP's ESOP currently holds, an
average of approximately 200,000 uncommitted leveraged ESOP shares were
excluded from earnings per share calculations in 1994. The fair value of
NSP's leveraged ESOP shares approximated cost at March 31, 1994.
Stock Compensation Expense
The Financial Accounting Standards Board (FASB) has issued an Exposure
Draft considering the accrual of compensation expense related to certain stock
awards beginning in 1997 with disclosure required beginning in 1994. NSP's
potential increase in annual compensation expense, if calculated under the
provisions of this Exposure Draft, would be approximately $1 million.
2. Foreign Equity Investments
NRG Energy, Inc (NRG), a wholly owned subsidiary of the Company, has
purchased equity interests in a number of non-regulated energy projects.
Prior to 1994 these investments had been limited to domestic projects which
are immaterial to the Company's results of operations and financial condition.
During the first quarter of 1994 investments were made by NRG in two
significant foreign projects.
In January 1994, a subsidiary of NRG made an initial investment of $7.5
million contributing to its 50% interest in a German corporation, Saale
Energie GmbH (Saale). Saale owns a 400-megawatt share of a 900-megawatt power
plant currently under construction in Schkopau, Germany. Through March 1994,
another subsidiary of NRG invested approximately $70 million in a joint
venture which acquired a 1680-megawatt coal-fired power plant in Gladstone,
Queensland, Australia. NRG's investment represents a 37.5% ownership in the
Australian plant.
Because NRG invested in the Australian plant at the end of the quarter
and the German project is under construction, NSP's operating results for the
first quarter of 1994 do not reflect any earnings from equity interests in
foreign projects.
Through March 31, 1994, NRG had not experienced any material translation
gains or losses from fluctuations in foreign currencies which have occurred
since the respective investment dates. NRG has initiated a hedging program
designed to preserve the U.S. dollar value of its equity position in foreign
currency denominated investment assets.
3. Contingent Liabilities
The Company's public liability for claims resulting from any nuclear
incident, and insurance coverage thereon, have not changed significantly from
the circumstances set forth in Note 15 to the Company's financial statements
contained in the Company's 1993 report on Form 10-K.
4. Resolution of Operating Contingency
At present operating levels, the current onsite storage pool for spent
nuclear fuel at the Company's Prairie Island Nuclear Generating Plant (Prairie
Island) will be filled in 1994. The Company proposed construction of a
temporary onsite dry cask (container) storage facility for spent nuclear fuel
at Prairie Island. The Minnesota Legislature (Legislature) considered the dry
cask storage issue during its 1994 legislative session as required by the
Minnesota Court of Appeals in June 1993.
On May 10, 1994, the Governor of the State of Minnesota (Governor)
signed into law a bill passed by the Legislature on May 6, 1994. The new law
authorizes the Company to install 17 dry casks at Prairie Island if the
Company satisfies certain responsibilities. The first increment of five casks
would be available after the Company executes an agreement with the Governor
concerning the renewable energy and alternative siting commitments contained
in the new law. The second increment of four casks would be available if the
Minnesota Environmental Quality Board finds that the Company has applied for
an alternative site license, used good faith in locating an alternative site
and has committed to build or purchase 100 megawatts (MW) of wind generation.
The final increment of eight casks would be available unless prior to June 1,
1999, the Legislature specifically rejects this authorization for the final
eight casks, which can only happen if the Company fails to meet the renewable
energy commitments of 225 MW of wind generation and 50 MW of biomass
generation by December 31, 1998.
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Results of Operations
Northern States Power Company's earnings per share for the first quarter
ended March 31, 1994, were $.94, up $.13 from the $.81 earned for the same
period a year ago. The number of average common and equivalent shares
outstanding (considering stock options and awards) during the first three
months of 1994 increased by approximately 3,879,000 shares in comparison to
1993 due mainly to a general stock offering made in May 1993.
Prairie Island Nuclear Fuel Storage - The Minnesota Legislature recently
approved a plan for the temporary onsite storage of spent nuclear fuel at the
Company's Prairie Island Nuclear Generating Plant. See Note 4 to the
Financial Statements for more information on this matter.
Foreign Investments - Through March 1994, NRG subsidiaries have invested
$77.5 million in two foreign energy projects; one in Australia and one in
Germany. See Note 2 to the Financial Statements for more information on
these projects and NRG's foreign hedging program.
Labor Agreements - NSP's labor agreements with its five International
Brotherhood of Electrical Workers (IBEW) Local Unions expired on December 31,
1993. On May 2, 1994 the IBEW members voted to ratify a three-year labor
agreement retroactive to January 1, 1994. An interim agreement had been in
effect since December 31, 1993.
Accounting Changes - Effective January 1, 1994, NSP adopted three new
accounting standards for postemployment benefits, fair value accounting for
certain investments and employee stock ownership plan transactions. These
accounting changes had an immaterial impact on earnings in the first quarter
of 1994 and are not expected to have a material impact on the full year 1994.
See Note 1 to the Financial Statements for more information on these
accounting changes.
First Quarter 1994 Compared with First Quarter 1993
Electric revenues for the first quarter 1994 compared with the first
quarter 1993 increased $24.1 million or 5.1%. Retail revenues increased
approximately $21.0 million or 4.8% largely due to a 3.8% increase in electric
retail sales. The increase in sales levels is due to more favorable weather
and sales growth this year compared with the same period a year ago. An
average retail price increase of 1.0% also contributed to higher revenues. The
price increase reflects full recognition of Minnesota jurisdiction interim
rates in 1994 and rate increases in effect after the first quarter 1993 for
NSP's North Dakota and South Dakota jurisdictions.
Gas revenues for the first quarter 1994 increased $18.6 million or 10.9%
compared with the first quarter 1993. Firm gas revenues rose $9.2 million or
6.2% due to a 3.2% increase in gas sales volume and an average price increase
of 2.9%. The increase in firm sales levels is due primarily to more favorable
weather this year compared with the same period a year ago. The price
increase reflects recovery of increased purchased gas costs resulting from
changed natural gas supply and demand market conditions due to cold weather
in 1994. Interruptible gas revenues remained relatively constant between the
two periods. Revenues from the Company's Viking Gas Transmission Company,
which was acquired in June 1993, increased revenues by $4.2 million. Other
gas revenues increased $4.4 million, mainly due to supplying gas to industrial
customers not on NSP's system.
Fuel for electric generation and Purchased and interchange power
combined for a net increase of $21.3 million or 19.2% for the first quarter
1994 compared with the first quarter 1993. This increase reflects the
additional demand and energy expenses associated with the power purchase
contract with Manitoba Hydro-Electric Board (MH), which went into effect in
May 1993. In addition, expenses for additional power purchases, mostly from
MH, were higher in 1994 than in 1993 due to increased energy requirements.
Market pricing of these purchases was higher in 1994 compared to more
favorable market pricing conditions in 1993. These purchased power increases
were somewhat offset by lower average cost of fuel in 1994 compared with 1993
due to full utilization of nuclear plants in 1994.
Cost of gas purchased and transported for the first quarter 1994
compared with the first quarter 1993 increased $6.9 million or 6.0% due mainly
to higher sendout volumes.
Other operation, Maintenance and Administrative and general expenses
together decreased $5.1 million or 3.0% compared with the first quarter 1993.
The decrease is due primarily to higher 1993 plant refueling and maintenance
costs related to planned outages.
Conservation and energy management increased $1.3 million due to
regulator-approved higher recovery levels for conservation and demand-side
management efforts.
Depreciation and amortization increased $2.2 million or 3.4% compared
with the first quarter 1993. The increase is mainly due to increased plant
in service between the two periods.
Property and general taxes for the first quarter 1994 compared with the
first quarter of 1993 increased $3.5 million or 6.1% primarily due to higher
property tax rates.
Income taxes for the first quarter 1994 compared with the first quarter
1993 increased $8.0 million or 23.3% primarily due to higher pretax operating
income between the two periods. Also, the federal income tax rate increased
from 34 percent to 35 percent in August 1993, which also contributed to the
increase.
Other income and deductions - net increased $3.7 million in the first
quarter 1994 compared with the same period a year ago primarily due to
improved profitability from non-regulated operations.
Interest charges have decreased $2.3 million or 8.7% compared with the
first quarter 1993, mainly due to refinancings of long-term debt at lower
interest rates after the first quarter in 1993. This was partially offset by
new debt incurred in connection with businesses acquired after the first
quarter in 1993.
Liquidity and Capital Resources
The Company had $143 million in commercial paper debt outstanding as of
March 31, 1994. The Company plans to keep credit lines of at least 85% of the
maximum level of commercial paper borrowings. Commercial banks currently
provide credit lines of approximately $300 million. These credit lines make
short-term financing available in the form of bank loans. The Company has
regulatory approval for up to $350 million in short-term borrowing levels.
This maximum may be utilized this year depending on market conditions related
to anticipated debt issuance as discussed below.
In 1994, stock options for the purchase of 290,138 shares were awarded.
As of March 31, 1994, a total of 793,033 stock options were outstanding, which
were considered as potential common stock equivalents for earnings per share
purposes.
As of March 31, the Company has issued 13,965 new shares of common stock
in 1994. All of these new shares were issued under the Executive Long-Term
Incentive Award Stock Plan.
On February 10, 1994 the Company issued $200,000,000 of first mortgage
bonds due February 1, 1999 with an interest rate of 5 1/2%. The proceeds from
these bonds were used to redeem $30,000,000 in principal amount of its 6 1/8%
First Mortgage Bonds, due June 1, 1995 at a redemption price of 100.29%, to
redeem $45,000,000 in principal amount of its 5 7/8% First Mortgage Bonds due
August 1, 1996 at a redemption price of 100.51%, to redeem $30,000,000 in
principal amount of its 6 1/2% First Mortgage Bonds due October 1, 1997 at a
redemption price of 100.75%, and to redeem $45,000,000 in principal amount of
its 6 3/4% First Mortgage Bonds due May 1, 1998 at a redemption price of
100.93%. The remaining proceeds were added to the general funds of the
Company and used to repay short-term borrowings.
The Company has entered into an interest rate swap agreement with
Kidder, Peabody Global Capital Corporation, which effectively converted the
interest cost of the recently issued 5 1/2% first mortgage bonds from fixed
rate to variable rate. The variable rate is set six months in arrears with
the rate changing on February 1 and August 1 of each year until final
maturity. As of March 31, 1994 the estimated net interest rate for this debt
would be approximately 3.3%.
On February 25, 1994 the Company repurchased $10,000,000 of 9 3/8% First
Mortgage Bonds due June 1, 2020 at a price of 112.75%. On April 12, 1994 the
Company repurchased another $20,000,000 of these 9 3/8% bonds at a price of
110.24%.
NRG has entered into a currency exchange agreement with Salomon
Brothers Holding Company, Inc. Pursuant to this agreement, transactions have
been executed which are designed to protect the economic value of NRG's equity
investments that are denominated in Australian dollars and German deutsche
marks. As discussed in Note 2, NRG has invested more than $70 million in
foreign projects through March 31, 1994. Assuming successful project closing,
NRG expects to make additional equity investments in foreign projects of up
to $28 million, and hedge them accordingly, later in 1994.
The Company is currently evaluating the issuance of $150,000,000 of
first mortgage bonds. Due to the prior uncertainty relating to Prairie Island
and the current instability in long-term interest rates, the Company elected
to delay the planned issuance of this debt. (See Note 4 to the Financial
Statements for discussion of Prairie Island.) In the interim, the Company has
increased bank credit lines to $300 million to support increased commercial
paper borrowings. The Company may elect to issue medium-term notes or first
mortgage bonds in smaller multiple increments. Any proceeds from these
borrowings would be added to the general funds of the Company and used to repay
short-term borrowings. In addition, the Company continues to evaluate the early
redemption of higher rate securities and depending on capital market
conditions would refinance these with lower rate long-term debt.
During the first quarter of 1994, the Company was placed on "credit
watch" by Moody's Investors Service and Duff & Phelps Credit Rating Co. (D&P)
due to the prior uncertainty regarding Prairie Island. D&P removed the
Company from credit watch on May 9, 1994, following passage of the law
regarding Prairie Island, and reaffirmed the previous bond ratings.
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of Shareholders of the Company was held on April 27,
1994, for the purpose of electing four nominees to Class II of the Board of
Directors, with terms expiring in 1997, and approving the appointment of
auditors. Proxies for the meeting were solicited pursuant to Section 14(a)
of the Securities Exchange Act of 1934, as amended, and there was no
solicitation in opposition to management's solicitations. All of management's
nominees for directors as listed in the proxy statement were elected. The
voting results were as follows:
Shares
Election of Directors Voted For Withheld Authority
Richard M. Kovacevich 54,806,702 783,302
Douglas W. Leatherdale 54,766,708 823,296
A. Patricia Sampson 54,724,938 865,066
Edwin M. Theisen 54,840,848 749,156
Shares
Ratification of Auditors Voted For Voted Against Voted Abstain
Deloitte & Touche 54,752,925 361,608 475,471
The number of broker non-votes on both the election of directors and the
ratification of auditors was zero (0).
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.01 Annual Executive Incentive Plan for 1994
(b) Reports on Form 8-K. The following reports on Form 8-K were filed
either during the three months ended March 31, 1994, or between March
31, 1994 and the date of this report:
January 31, 1994 (Filed February 9, 1994) - Item 5. Other Events. Re:
Disclosure of an appeal of the Minnesota Public Utilities Commission's
determination of the allowed return on equity that was filed with the
Minnesota Court of Appeals. Disclosure that the Company was notified
by the United States Environmental Protection Agency that it is a
potentially responsible party at the Brooklyn Park Superfund site in
Minnesota. Disclosure of the Company's unaudited consolidated
statements of income, cash flows and changes in common stockholders'
equity for the three years ended December 31, 1993 and the Company's
unaudited consolidated balance sheets and statements of capitalization
at December 31, 1993 and 1992. Item 7. Financial Statements and
Exhibits. Re: Disclosure of Exhibit 28.01 - Certain Unaudited
Financial Information.
February 10, 1994 (Filed February 14, 1994) - Item 5. Other Events.
Re: Disclosure of Underwriting Agreement relating to $200,000,000 in
aggregate principal amount of the Company's First Mortgage Bonds,
Series due February 1, 1999. Item 7. Financial Statements and
Exhibits. Re: Filing of Underwriting Agreement between the Company
and Morgan Stanley & Co. Inc., Smith Barney Shearson Inc. and Piper
Jaffray, Inc. relating to $200,000,000 First Mortgage Bonds, Series
due February 1, 1999; Filing of Supplemental Trust Indenture relating
to First Mortgage Bonds, due February 1, 1999; Filings of computation
of ratio of earnings to fixed charges.
March 15, 1994 (Filed March 16, 1994) - Item 5. Other Events. Re:
Disclosure of events of the Minnesota Legislature concerning the
Company's proposal to store spent nuclear fuel from its Prairie Island
Nuclear Generating Plant in temporary onsite storage. Disclosure that
the Company's union membership rejected a three-year contract offer,
but that discussions would continue.
April 4, 1994 - Item 5. Other Events. Re: Disclosure that the
Company and its unions reached a tentative agreement for contracts to
be effective from January 1, 1994 through December 31, 1996 and that
the membership would vote on the contract on May 2, 1994. Also, the
interim agreement was extended through May 31, 1994.
May 2, 1994 (Filed May 5, 1994) - Item 5. Other Events. Re:
Disclosure that the Company's union membership voted to ratify a
three-year labor agreement retroactive to January 1, 1994.
May 6, 1994 (Filed May 9, 1994) - Item 5. Other Events. Re:
Disclosure concerning approval of a law by the Minnesota Legislature
for a plan to store spent nuclear fuel from the Company's Prairie
Island Nuclear Generating Plant in temporary onsite storage.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTHERN STATES POWER COMPANY
(Registrant)
(Roger D. Sandeen)
Roger D. Sandeen
Vice President, Controller and
Chief Information Officer
(Arland D. Brusven)
Arland D. Brusven
Vice President Finance and Treasurer
Date: May 16, 1994
The Executive Incentive Compensation Plan (Plan) rewards executives for
creating and continuing a total quality service organization. Reliable, low
cost service to our customers, through the safe and efficient operation of all
plant, transmission and distribution facilities while adhering to strict
company and federal guidelines, is of utmost importance.
The components of the Plan include financial, operating and individual
performance objectives, which are important to both customers and
shareholders. The Plan will be effective January 1, 1994, and will remain in
effect until December 31, 1994, unless earlier amended or terminated.
Participation in the Plan
Participation in the Executive Incentive Plan will be restricted to the
following officers:
I. Chairman of the Board and CEO
II. President and COO
III. Senior Principal Officers
VP Minnesota Electric
VP and CFO
President, NSP Generation
President, NSP Gas
VP Law and General Counsel
IV. Principal Officers
VP Customer Operations
VP Customer Service
VP Human Resources
VP Controller and CIO
VP Corporate Strategy
VP and Treasurer
VP Nuclear Generation
1994 Plan Objectives
The Plan's objectives reflect the company's goal to be the provider of choice
for our customers. To be a strong business partner we must be financially
sound - provide excellent customer service, price and flexibility - and have
a work force composed of high quality, skilled individuals.
The 1994 goals and measurements are as follows:
<TABLE>
<CAPTION>
Objective Measurement Threshold Target Maximum
<S> <C> <C> <C> <C> <C>
Financial Company $3.00 $3.30 $3.45
Strength Earnings Per Share
Business Area MN Electric $1.8295 $2.0124 $2.1039
Earnings Per Share NSP Gas $.1737 $.1911 $.1998
Customer Customer Surveys MN Electric 87% 94% 97%
Satisfaction NSP Gas 92% 95.25% 96%
Corporate (80% MN Electric; 20% NSP Gas)
Price of Product Price Generation $31.66 $31.07 $30.77
Product per MWH MN Electric $57.55 $56.70 $55.85
Comparison to NSP Gas 93.0% 92.5% 92.10%
regional utilities' prices
Corporate (40% Generation; 40% NSP Electric; 20% NSP Gas)
Safety Lost Work Day Rate NSP Generation 1.23 1.10 1.00
(50%) MN Electric-
Cust. Operations 1.39 1.26 1.13
MN Electric-Cust.
Service 0.90 0.75 0.60
NSP Gas 3.00 1.80 1.50
Corporate-Total
MN Company 1.32 1.12 1.02
OSHA Incident Rate NSP Generation 6.37 5.60 4.80
(50%) MN Electric-Cust.
Operations 7.00 6.48 6.00
MN Electric-Cust.
Service 6.45 5.89 5.49
NSP Gas 10.00 6.00 5.50
Corporate-Total
MN Company 7.28 5.62 4.79
Nuclear Prairie Island SALP (25%) 3rd Quartile 2nd Quartile Best Quartile
Safety
Monticello SALP (25%) 3rd Quartile 2nd Quartile Best Quartile
NRC Shutdown orders (25%) 1 0 0
(self-induced)
Uncontrolled Radioactive
Discharges (12.5%) 2 1 0
Civil Penalties (12.5%) 3 2 1
</TABLE>
<TABLE>
<CAPTION>
Goal Measurement Threshold Target Maximum
<S> <C> <C> <C> <C> <C>
Service Generation Base availability (40%) 91% 93% 94%
Reliability Intermediate
availability (20%) 83% 85% 86%
Start-up (20%) 84% 90% 95%
Customer survey (20%) 79% 85% 90%
MN Electric Total feeder
outages (25%) 1800.00 1450.00 1300.00
Human error caused
feeder outages (25%) 65.00 30.00 12.00
Critical customer
outages (25%) 2.45 1.71 1.50
Momentary outages
(12.5%) 6.50 4.60 3.00
Sustained outages
(12.5%) 2.00 1.30 0.80
NSP Gas Reduction in service
and main hits (70%) 5% 13% 15%
Reduction in
mislocates (30%) 0% 25% 38%
Corporate (40% Generation; 40% NSP Electric; 20% NSP Gas)
Individual Performance review process
Performance
</TABLE>
Target Awards by Position
The following targets and maximums are a function of achievement against the
Plan's objectives.
Award as % of Base Pay
Target Maximum 1
I.Chairman of the Board and CEO 40% 75%
II.President and COO 35% 63%
III.Senior Principal Officers 30% 54%
IV.Principal Officers 20% 2 36%
1 Maximums are determined as follows:
Maximum
EPS measure 3 times target
(i.e., if target is 20% of your award, the
maximum is 60%)
All other plan measures 1.5 times target
2 VP Nuclear Generation has a target of 30% of salary due to an emphasis on
and the critical nature of nuclear safety.
Individual Goals and Target Awards
<TABLE>
<CAPTION>
Position Measure/Percentage of Target
Customer Price of Nuclear Indiv.
EPS/Bus.EPS Satisfaction Product Safety Safety Reliability Perform.
<S> <C> <C> <C> <C> <C> <C> <C>
Chairman of the 25% 15% 15% 10% 10% 15% 10%
Board and CEO
President and 20% 10% 15% 10% 10% 15% 20%
COO
VP and CFO 30% 10% 20% 10% 10% 20%
President, 20% 20% 10% 10% 20% 20%
NSP Generation*
VP MN Electric 10%/10% 15% 20% 10% 15% 20%
and President,
NSP Gas
VP Law and
General Counsel 20% 15% 20% 10% 10% 25%
VP Nuclear 20% 15% 10% 20% 15% 20%
Generation*
Business Area 10%/10% 15% 15% 10% 20% 20%
Officer
Corporate 20% 20% 15% 10% 10% 25%
Officer
*Customer satisfaction is combined with service reliability for President, NSP
Generation, and VP Nuclear Generation.
</TABLE>
Plan Objective Definitions
1) Financial Strength
Corporate Earnings Per Share
The determination of the final corporate EPS result is net of any incentive
awards paid under the Plan. One time earnings events may be excluded in whole
or in part. In determining NSP's EPS for the purpose of the Plan, any earnings
which may have been denied as part of a regulatory proceeding, even though
such denial may be appealed, shall not be included. The Committee will have
sole discretion to determine whether such additional earnings will be included
at a later time and whether any adjustments to awards for the Plan year will
be made.
Business Area Earnings Per Share
Minnesota Electric and NSP Gas officers will have a portion of their incentive
awards based on the EPS results of their business area. MN Electric includes
both retail and wholesale earnings.
2) Customer Satisfaction
The basis of the customer satisfaction rating is a composite of surveys NSP
regularly conducts. The surveys include customer satisfaction related to NSP's
role in the community; customers' perceptions of NSP's rates; customers'
perceptions of employee competence; courteousness and willingness to please;
and reliability of service.
NSP Generation
Customer satisfaction is combined with service reliability for NSP Generation.
Minnesota Electric
The VP Minnesota Electric, VP Customer Operations and VP Customer Service will
be measured on an average of six surveys which include: Customer Business
Office, Electric Sales Representative, Design and Construction, Electric
Service, Tree Trimming and Wholesale. Satisfied customers give us a rating of
excellent and good from a four-point rating scale.
NSP Gas
For the President, NSP Gas, the award will be determined based on the results
of gas customer satisfaction surveys. Satisfied customers give us a rating of
excellent, very good and good from a five-point rating scale.
3) Price of Product
Price of product measures NSP's ability to maintain a competitive cost of
electric service:
NSP Generation
This is NSP Generation's aggregate product price. This is the total cost of
generating electricity measured in dollars per megawatt. This cost includes
all direct NSP Generation costs and corporate administrative and general
expenses needed to support NSP Generation.
Minnesota Electric
Minnesota Electric's product price is measured as the total price to NSP's
customers. This measure is calculated as total MN Electric revenues divided
by total megawatt hours.
NSP Gas
For 1994, the following utilities will be used as a comparison group to
measure NSP's ability to maintain and improve its gas rate relative to that
of the comparison group.
- - -Iowa Public Service
- - -Minnegasco
- - -Montana Dakota Utilities
- - -People's Natural Gas
- - -Wisconsin Gas Company
NSP's average firm retail revenue per thousand cubic foot (MCF) will be
compared to the average firm retail revenue per MCF for the selected peer
utilities over a three-year rolling time period which ends September 30, 1994.
4) Safety
Lost work day (LWD) and OSHA incidents will be the measures for safety.
5) Nuclear Safety
Includes the following measurements:
- - -Monticello and Prairie Island SALP ratings - SALP is the Systematic
Assessment of Licensee Performance program. This is a Nuclear Regulatory
Commission (NRC) assessment of the plant's performance in the functional
areas of maintenance, operations, engineering and plant support.
- - -NRC Shutdown Orders - NRC-ordered nuclear plant shutdowns due to safety
concerns which don't come from a generic industry issue.
- - -Uncontrolled Radioactive Discharges - An uncontrolled discharge of
radioactive releases which results in an NRC violation.
- - -Civil Penalties - NRC monetary fine for violations of its enforcement program,
which protects the health and safety of the public, employees and the
environment.
6) Service Reliability
NSP Generation
Service reliability includes customer satisfaction for NSP Generation. Service
reliability includes four measurements.
- - -Base Availability - Base plant generation facilities meet much of NSP's
energy requirements during standard operating time. This measures the time
these plants are available for MN Electric's requirements. Not included in
the availability percents are planned outages, planned derates, maintenance
derates and maintenance outages during off-peak hours and periods of reserve
shutdown.
- - -Intermediate Availability - This measures the availability of intermediate
power plants which are used to supply some base energy needs as well as pick
up new energy needs on demand. Not included in the availability percents are
planned outages, planned derates, maintenance derates and maintenance outages
during off-peak hours and periods of reserve shutdown.
- - -Startup - This measures NSP Generation's startup capability. The measure is
on-time starts divided by unit commits.
- - -Survey - A survey that will measure subjective issues from the Partnership
Commitment between MN Electric and NSP Generation. It will include measurement
of any additions to the Partnership Commitment made in 1994.
Minnesota Electric
Service reliability for Minnesota Electric officers includes five measures.
- - -Total Feeder Outages - Number of outages (momentary or sustained) to our
distribution main circuits. This will be "weather normalized." Weather
normalized means the goal will take out uncontrollable outages caused by
major storms. There are typically four to eight major storms per year.
- - -Human Error Caused Feeder Outages - Number of outages (momentary or
sustained) to distribution main circuits due to an error by an employee that
should have been prevented.
- - -Critical Customer Outages - Average number of momentary or sustained outages
to a Critical Customer facility. As of January 1994, there were 62 critical
customers.
- - -Momentary Outages - Percent of retail customers with more than four
zero-voltage events less than five minutes in duration.
- - -Sustained Outages - Percent of retail customers with four zero-voltage events
equal or greater than five minutes in duration.
NSP Gas
Two reliability goals will be measured for NSP Gas:
- - -Service and Maintenance Hits - Any damage to gas mains and/or gas services
resulting from excavation.
- - -Mislocates - The failure to provide location markings completely and/or
accurately within 24 inches of either side of NSP's underground facilities.
Miscellaneous
Late Entry of Participants
Any person who becomes eligible to participate after January 1 of the Plan
year will become a participant as of the date the person became eligible.
Incentive awards payable to such participants shall be prorated based on the
number of days of service in an eligible position during the Plan year.
Change in Position
Eligible employees under the Plan who have a change in position during the
Plan year will have their incentive award calculated under the Plan award
levels for both positions, prorating the award by days of service at each
level. (This includes prorating between the Management Incentive Plan.)
Terminations
Awards for eligible employees who terminate during the Plan year will be
handled as follows:
- - -Voluntary resignations - no incentive award.
- - -Involuntary terminations for cause - no incentive award.
- - -Retirement, death, disability or involuntary termination for reasons other
than cause - incentive award prorated by the number of months of active
service during the current incentive Plan year.
Rounding
All numbers used in calculations determining performance/incentive awards will
be rounded to the fourth decimal place. The final award calculation will be
determined to the nearest hundredth of a percent.
Administration
The Plan will be administered by the Corporate Management Committee of the
Board of Directors, which has the sole authority to establish and interpret
the Plan's terms and conditions.
Right to Continued Employment
No participant shall have any claim or right to be granted an incentive award
under the Plan, and the granting of an incentive award shall not be construed
as giving the participant the right of continued employment with NSP. The
Company further reserves the right to dismiss a participant at any time, with
or without cause, free from any claim of liability other than provided under
this Plan document.
Modification, Amendment or Termination
The Committee reserves the right to modify the incentive award payable to any
participant calculated under the foregoing provisions of the Plan and to make
other exceptions to the terms of the Plan as the Committee deems appropriate
in its sole discretion. The Committee also reserves the right to amend or
terminate the Plan at any time, provided, however, that no such amendment or
termination should adversely affect the rights of any participant (without his
or her consent) with regard to any award previously made.
